The Top Five Overbought ETFs

As I am writing this all of the major market indices are reaping gains around 2%.

As a result, many of the ETFs I follow for the Options Advantage service have pushed into a short-term “very overbought” state so while this rally looks strong, I do expect at least a pause over the next week or so.

Some of the most short-term overbought ETFs at the moment are:

SPDR S&P Retail ETF (XRT) 99.2 (very overbought)

iShares DJ U.S. Real Estate (IYR) 95.4 (very overbought)

SPDR Health Care (XLV) 98.5 (very overbought)

SPDR Financial Sector (XLF) 98.5 (very overbought)

iShares Russell 2000 (IWM) 97.3 (very overbought)

The aforementioned ETFs are just a few of what is now a plethora of overbought ETFs in the market. In fact, out of the 40 ETFs that I follow for the Options Advantage service 32 are in an extreme overbought state.

Typically, when this type of overbought set-up occurs I will fade the market by selling bear call spreads or through buying puts. I prefer to use the former strategy, but will occasionally use the latter strategy for a shorter-term scalp trade.

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